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Hide or show? Endogenous observability of private precautions against crime when property value is private information

  • Baumann, Florian
  • Denter, Philipp
  • Friehe, Tim

This paper analyzes a contest in which defenders move first, have private information about the value of the objects they are trying to protect, and determine the observability of their defense efforts. The equilibrium consistent with the intuitive criterion depends on the distribution of defender types, the magnitude of the difference between defender types, and the asymmetry between defender and aggressor regarding the valuation of the objects at stake in the contest. Our setting captures key characteristics of the interaction between households and thieves, focusing on the classic distinction between observable and unobservable private precautions against crime. An analysis of welfare implications determines that a setting in which information about the value of the protected objects is private results in a better outcome than a complete-information scenario.

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Paper provided by Düsseldorf Institute for Competition Economics (DICE), University of Düsseldorf in its series DICE Discussion Papers with number 115.

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Date of creation: 2013
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Handle: RePEc:zbw:dicedp:115
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  7. Baumann, Florian & Friehe, Tim, 2013. "Private protection against crime when property value is private information," DICE Discussion Papers 91, Düsseldorf Institute for Competition Economics (DICE), University of Düsseldorf.
  8. Morgan, John, 2003. "Sequential Contests," Public Choice, Springer, vol. 116(1-2), pages 1-18, July.
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  18. Florian Baumann & Tim Friehe, 2010. "Product liability and the virtues of asymmetric information," Journal of Economics, Springer, vol. 100(1), pages 19-32, May.
  19. Anke Kessler, 1998. "The Value of Ignorance," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 339-354, Summer.
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  21. Gintis, Herbert, 2007. "The evolution of private property," Journal of Economic Behavior & Organization, Elsevier, vol. 64(1), pages 1-16, September.
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